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Microcap & Penny Stocks : FMA / FracMaster -- Ignore unavailable to you. Want to Upgrade?

To: StockPro who wrote (135)	4/29/1999 9:29:00 AM
From: blue_chip	Read Replies (1) \| Respond to of 233

Balm bids to stop sale of Fracmaster Former chairman proposes rescue with him in charge Thursday, April 29, 1999 Steven Chase Alberta Bureau Calgary -- Former Fracmaster Ltd. chairman Alfred Balm is making an 11th-hour bid to stop the sale of his former company's assets to a U.S. oil field services rival. "It's his view the company should be kept going because in the long run there will be value there for the banks and the shareholders, and in the meantime the employees will have jobs," William Smith, Mr. Balm's lawyer, said yesterday. Sources close to Mr. Balm said he is proposing to return as chairman, assume control over Fracmaster management and lend the embattled company about $20-million in a bid to steer it back to profitability and get better value for shareholders and employees. The move came less than one day after Fracmaster's board announced a deal to sell its assets to Houston-based UTI Energy Corp. for an undisclosed sum in an arrangement that would leave nothing for Fracmaster shareholders because it doesn't even pay off the company's secured debts. Cash-poor Fracmaster, which has been under court protection from creditors since mid-March, said the UTI offer "was insufficient for payment in full of the claims of the company's secured creditors." Fracmaster's debt is more than $130-million including $116-million in loans and $17-million owed to suppliers. Calgary-based Fracmaster said it agreed to the UTI bid because it "offered the highest value for the company's assets." Mr. Balm believes his proposal is a far better deal for Fracmaster shareholders and employees, Mr. Smith said. "As we understand UTI's proposition is they want to buy the assets. They don't want to leave anything for the employees or the shareholders or the unsecured creditors." A lawyer for Mr. Balm, who still has voting control over about 40 per cent of Fracmaster, is expected to appear in a Calgary court as early as Friday to try and convince an Alberta Court of Queen's Bench that his alternative offer should be considered. He has already sent this proposal to Fracmaster, sources said. The proposal would see Mr. Balm get Fracmaster warrants for his loan. He is also trying to cobble together support from other shareholders, possibly to raise more money, Mr. Smith said. Texas sources familiar with Mr. Balm's plans said he thinks he can raise additional money because he believes the oil service sector is set for recovery with the recent upswing in crude prices and strengthening natural gas prices. Fracmaster has so far not benefited from the upswing but others in the oil field service sector have. The oil field services subindex of the Toronto Stock Exchange has gained nearly 25 per cent this year. Once a stock market darling worth $1-billion, Fracmaster's stock has fallen more than 97 per cent. Fracmaster has been hit hard in the last year by the 1998 collapse in oil prices and economic turmoil in Russia, where it previously conducted the majority of its business. It reported a 1998 loss of $137.3-million, down from a 1997 profit of $43.4-million. The TSE yesterday suspended Fracmaster from trading, and officials said they are not sure the stock will trade again if the deal with UTI goes through. The stock last traded at 50 cents, down from its 52-week high of $20. Officials from UTI and Remy Capital Partners III, a private limited partnership that controls UTI, said in a conference call they expect to operate Fracmaster as a separate business unit with its head office in Calgary if an Alberta judge approves the deal Friday. The deal is to be presented to Alberta Court of Queen's Bench Friday under Canada's Companies' Creditors Arrangement Act. UTI and Remy officials said they expect to retain as many of Fracmaster's employees as they can. Fracmaster's worldwide work force is 667. UTI said it will be supplying $15-million (U.S.) of the purchase price of the assets, with Remy and possibly others paying the balance. Remy officials said they are prepared to keep Fracmaster's Russian operations if they don't require cash infusions and said they plan incremental investments in the company's assets. UTI has 120 drilling rigs and supplies contract drilling and pumping and pressure services to U.S. oil firms. UTI shares gained $1.56 (U.S.) to close at $11.68 on the New York Stock Exchange yesterday. Unidentified Fracmaster investors expressed anger on Internet chat sites at the UTI deal, which leaves them with nothing after their shares lost so much ground over the past year. "It looks like we shareholders have totally had it. Wish there was some action we could take . . . Demonstrate outside [the Fracmaster] tower [in Calgary]?" wrote one investor on a Yahoo finance message board yesterday. But one oil field services analyst, who asked not to be identified, said common shareholders are on "the bottom of the totem pole when they buy equity." Shareholder rights expert William Riedl of Fairvest Securities Corp. in Toronto agreed there's little shareholders can expect in this situation: "That's pretty well it, at this stage." Mr. Balm's attempt to ride to the rescue of Fracmaster comes as he is in the midst of trying to recover approximately $200-million from investors who walked away from their obligation to pay the final instalment of a share purchase deal for his 67.5-per-cent interest in the company. Two-thirds of instalment receipt holders defaulted, leaving Mr. Balm with voting control over 40 per cent of the shares. He is suing a diverse crowd of more than 75, including investors lawyers and offshore companies in the meantime. THE CREDITORS The syndicate of Fracmaster Ltd. lenders. Royal Bank of Canada. Canadian Imperial Bank of Commerce. Bank of Nova Scotia. Hong Kong Bank of Canada. Banque Nationale de Paris (Canada). Credit Suisse First Boston Canada. Fracmaster's debt hit $116-million as of March 19. It also owed suppliers more than $17-million. FRACMASTER'S ROLLER-COASTER RIDE Aug. 13, 1997: Fracmaster Ltd. chairman Alfred Balm announces he is selling his 67.5-per-cent stake in the company and resigning his position Sept. 9: Offering is successful. Investors pay $9.75 up front for each share with promise to pay $9.75 one year later. June 15, 1998: Shares fall below the final instalment receipt value, meaning it's cheaper to buy a share on the open market than pay the final receipt payment. Sept. 9: Instalment receipt fails. Within a week, Mr. Balm vows to go after those who owe him and Fracmaster announces it is putting itself up for sale. March 19, 1999: Gains bankruptcy protection. April 6: Mr. Balm launches what is believed to be the first lawsuit of its kind in Canada, suing a diverse crowd for $200-million in unpaid stock instalment fees and damages. April 27: Announces it has found a buyer, but Mr. Balm intervenes the next day in an attempt to block deal.